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Is a 90&percnt; liability offer one working day before a five day clinical negligence trial a genuine attempt to settle&quest;

09 February 2018

Background

The Claimant suffered an acquired brain injury in the period shortly before his birth caused by what was agreed to have been a period of prolonged partial hypoxia.

Shortly before the start of the 5 day trial, the Claimant made a Part 36 offer to settle liability on a 90% basis (note the relevant period came to an end 1 working day before the start of the trial).

After the trial and in a reserved Judgment, Mr Justice Foskett found in favour of the Claimant and ordered that damages be assessed.

The Claimant then sought to invoke the provisions of CPR 36.17, on the basis that he had achieved an outcome at least as advantageous as his pre-trial Part 36 offer.

The Issue

The Defendant argued that the 90% liability offer was not a genuine attempt to settle within the meaning of CPR 36.17(5)(e), on the basis it did not reflect any realistic assessment of the risks of the litigation.

The Defendant noted that the offer letter did not explain why only a 10% discount was being offered, and argued that a 10% reduction to reflect the litigation risk was a significant under-valuation. In particular it was suggested that clinical negligence cases are ‘notoriously hazardous’ and can ‘seldom be regarded as open and shut’.

Decision

Mr Justice Foskett dismissed the Defendant’s argument, and concluded:

How one side perceives the risks in a piece of litigation will almost invariably be different from the way the other side perceives the risks.

To embark on a retrospective assessment of the risks would be to embark on a kind of mini-trial to determine how the case should have looked before the offer was made, and ordinarily this sort of exercise should not be carried out.

When a 90% offer is made it should be regarded as a case where the Claimant’s team regard it as a very strong case but are also prepared to accept a modest discount to secure absolutely certainty of obtaining substantial compensation.

Whilst it is open to the offeror to explain this kind of thinking in the letter, in some cases it might not assist, and sometimes it may be better to simply leave it to the recipient to assess the offer.

The Claimant’s case was known to have a very high value (i.e. several million on a lump sum basis), and as such a 10% reduction would be not be an insignificant amount.

On a very practical note, it was pointed out that if the Defendant’s argument was to succeed, it could have the effect of making it extremely difficult to settle cases on a 90% basis – which is obviously something that happens routinely (especially in high value and serious cases).

Discussion

In Huck v Robson [2002] EWCA Civ 398 the Court of Appeal had to consider whether a 95% offer was ‘merely a tactical step’. Subsequently in Wharton v Bancroft [2012] EWHC 91 it was pointed out that by definition all Part 36 offers are tactical. Since then it’s generally been considered difficult to apply the Huck test, and the problem was further exacerbated by the introduction of the ‘additional amount’ awarded to Claimant’s under CPR 36.17(4)(d).

The decision in JMX therefore offers some welcome clarity. We now know that in a high value case (and perhaps all cases) an argument that a 90% offer was not a genuine attempt to settle can be considered to be the kind of argument which (in the words of Mr Justice Foskett) ‘could hardly ever succeed’. Presumably therefore only the most confident Claimant lawyers will not be making 90% offers shortly before trial!

A footnote on WP Discussions

During the course of the hearing the advocates made various references to comments made during negotiations and meetings that took place presumably on a without prejudice basis.

No objections to this were made by either side, but Mr Justice Foskett used this Judgment as an opportunity to re-assert the point that the content of privilege discussions should generally remain privileged.

Mr Justice Foskett said that a general ‘open house’ about what was said and by whom during negotiation discussions could endanger the long recognised utility of the without prejudice negotiation process.